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Will the Sparks Fly? The Role of the European Union in the Liberalisation of the Electricity Industry

Published online by Cambridge University Press:  27 October 2017


The impact of the increasing liberalisation of the energy sector in general and electricity supply in particular is hard to deny. Yet just a few short years ago, such developments were almost unthinkable. A complex combination of factors has led to an increasingly favourable political and economic climate for market opening and competition. However, the benefits of these developments remain distinctly unevenly spread throughout Europe, while the potential difficulties that an unchecked liberalisation process can cause are slowly coming to the fore. The challenge faced by the European Union in this sector is to promote these developments while remaining alive to their potential social and environmental consequences.

Research Article
Copyright © Centre for European Legal Studies, Faculty of Law, University of Cambridge 2000

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1 Ofgem’s Briefing for Journalists on “The NETA Programme”, 6 February 2001 (available at stresses that there are very different circumstances in, for example, the market in England and Wales: 1. There is no capacity shortage; 2. There has been significant new plant commissioning since privatisation, so the average plant age is much lower; 3. There is little reliance on hydro-electricity; 4. No restrictions are placed on participants contracting forward; 5. There are no restrictions on the System Operator contracting forward and 6. No caps have been imposed on retail prices. However, recent reports suggest that Ireland may be heading into difficulties in this area, as it is experiencing worsening capacity shortages (due to a failure accurately to predict the extent of the increase in demand and caps on certain retail prices). See Brown J. M. “Ireland battles to meet power demand” The Financial Times, Wednesday 21 February 2001, 8.

2 Indeed, the Twelfth Report (1998–1999 session) of the House of Lords Select Committee on the European Communities (“Commission White Paper on Energy from Renewable Sources”, 29 June 1999; see the electronic version available on the House of Lords website at: shows serious concern that the UK government’s current approach will not achieve these environmental goals, despite their apparent technical feasibility. In this vein, the petrol protests of the autumn of 2000 in the UK showed the vulnerability of the environmental argu ment when massed commercial and social interests make their voices heard. Interestingly, the government did not with any great fanfare seek to justify high taxes on environmental grounds and shied away from suggesting this as a possibly valid reason for such a policy (perhaps because there is no concrete evidence that any of this extra taxation money is then directed towards solving just that sort of problem?).

3 COM(85)310, (1985).

4 For an interesting account of the development of the Single Market Programme, see Lord, Cockfield, The European Union—Creating the Single Market (Chichester, Wiley, 1994 Google Scholar).

5 Ibid, pp. 38-41.

6 Commission Working Document on the Internal Energy Market, COM(88)232, (1988).

7 See, for a brief discussion, Johnston, A.C.Maintaining the Balance of Power: Liberalisation, Reciprocity and Electricity in the European Community17 (1999) Journal of Energy and Natural Resources Law 121, 122-125CrossRefGoogle Scholar.

8 Directive 90/377/EEC OJ 1990 L 185/16.

9 Directive 90/547/EEC OJ 1990 L 313/30.

10 Directive 96/92/EC OJ 1997 L 27/20.

11 For a detailed discussion of the proposals, problems, arguments and counter-proposals, see the Opinion of the Economic and Social Committee (93/C 73/10, OJ 1993 C 73/31), the Opinion of the European Parliament of 17 November 1993, the Commission’s amended pro posal (COM(93)643 final of 1993) and the commentary provided by Trepte P-A. (1992) Utilities Law Review 18 and Hancher, L. (1992) Utilities Law Review 133, (1993) Utilities Law Review 79 Google Scholar, (1994) Utilities Law Review 64 and (1996) Utilities Law Review 217.

12 “Communication from the Commission to the Council and the European Parliament—Recent progress with building the internal electricity market” COM(2000)297 final (Brussels, 16 May 2000).

13 See for a summary of the January 2000 EUROSTAT reports on electricity prices, one on industry and one on household prices.

14 This cross-border trading figure is, however, rather disappointing and indicative of the difficulties to be discussed below. The International Energy Agency, Energy Statistics of IEA Countries, (Paris, OECD, 1993 Google Scholar) suggested that overall trade rose from only 3% of Member States’ requirements in 1970 to nearly 7% in 1990, so an increase to 8% of total production seems less impressive, although it should be remembered that consumption and production in general are clearly on the increase, so in real terms the quantity (if one can use that expression with regard to electricity!) has increased. Nevertheless, more can be done here.

15 See, where the individual summaries for each Member State are accessible.

16 Although there is no space to discuss this here, the role of the Florence Forum (and of the Madrid Forum in similar vein in the Gas sector) is worthy of detailed study, to draw out its posi tion within the process of negotiating the future of the industry and to assess the strategy of the participants in their relations with the Commission and the Member States. The transparency of some of the arguments that have raged has been relatively high and it has been a focal point for bringing some of the difficulties of those in the industry into the open. Just how influential it has been may become clearer during the course of 2001: indeed, it may have had more influence than it suspects, although whether this will be a positive aspect (for the participants or the industry and consumers in general) remains to be seen.

17 From the DG(TREN) website on the “Florence Regulatory Process”, at the following address:

18 “Commission to demand German energy regulator” 338 (2000) Power in Europe (24 November 2000), where the 9-10 November 2000 meeting of the Forum was told by the Commission’s Director General for energy, Francois Lamoreux, of future proposals to push the liberalisation process by means of new European legislation. As he said, “. . . operators do not have a great interest in helping us. This is not a merger case here the parties want to press ahead; here the parties want the present situation to continue”. Furthermore, the same article quotes Dutch MEP Wim Van Velzen, who reported a number of complaints from Dutch industrial electricity consumers. “They say they can buy power anywhere and get a guarantee of delivery to the Dutch border—but that’s it. Nobody can get it any further because there is no capacity”. The International Federation of Industrial Electricity Consumers (IFIEC) has voiced similar complaints: “[t]here is little or no trade going on now. Our members are getting offers to supply that are pushed out by the [transmission] charge ... it kills competition” (David Williams of IFIEC).

19 Originally, the French had also insisted on this transaction component (see ‘Florence Forum: The threat of new regulation’ 142 (2000) EU Energy Policy (31 October 2000), but the latest reports suggest that the French regulator has fallen into line with the general consensus that the export charge should be dropped, to be replaced by spreading the cost of transit flows across all network users (“Commission to demand German energy regulator” 338 (2000) Power in Europe (24 November 2000)).

20 “Second Report to the Council and the European Parliament on the Harmonisation Requirements: Directive 96/92 concerning the internal market for electricity”, (SEC 1999/470) 16 April 1999 (Section II.2.1 on Cross-border tarification and settlement).

21 See the discussion of the Commission’s forthcoming proposals for the Internal Energy Market, coupled with complementary measures in fields such as transmission pricing and infrastructure, in the text accompanying n 84, below.

22 Commission’s Draft Conclusions presented to the Florence Forum of 9–10 November 2000.

23 This is a necessarily brief and simplistic overview given constraints of space. For details of the Commission’s analysis of the possible alternatives, see the “Second Report to the Council and the European Parliament on the Harmonisation Requirements: Directive 96/92 concerning the internal market for electricity”, (SEC 1999/470) 16 April 1999 (Section II.2 on Cross-border tarification and settlement).

24 “Second Report to the Council and the European Parliament on the Harmonisation Requirements: Directive 96/92 concerning the internal market for electricity”, (SEC 1999/470) 16 April 1999 (Section 1.1.1 on Available interconnector capacity).

25 See Arts. 17(5) and 18(4), Directive 96/92/EC, above n 10.

26 “Second Report to the Council and the European Parliament on the Harmonisation Requirements: Directive 96/92 concerning the internal market for electricity”, (SEC 1999/470) 16 April 1999 (Section 1.2.1 on Maximising available transmission capacity).

27 E.g. Germany might operate a “first come, first served” system, while Denmark might give priority to electricity from renewable sources.

28 “Second Report to the Council and the European Parliament on the Harmonisation Requirements: Directive 96/92 concerning the internal market for electricity”, (SEC 1999/470) 16 April 1999 (Section 1.2.3(1) on the evaluation of capacity reservation agreements).

29 By means of two agreements: a 60% reservation between Statkraft of Norway and Elsam of Denmark and the remaining 40% by a deal between Statkraft and E.ON of Germany.

30 Also under the Statkraft—E.ON deal, which included a further reservation of transit capacity through Western Denmark.

31 In the E.ON case, this point was strengthened by the ongoing merger assessment of the VEBA/VIAG tie-up by the Commission (Approved, “subject to stringent conditions”: see Commission Press Release IP/00/613, Brussels, 13 June 2000), where similar concerns were raised. Furthermore, if the allegations by PreussenElektra concerning the Stromeinspeisungsgesetz (that “feeding wind-produced electricity into the medium-voltage networks of the German regions close to the Danish border creates bottlenecks in electricity transmission between Germany and Denmark at the high voltage level” (see the Opinion of Advocate General Jacobs in case C-379/98 PreussenElektra v. Schleswag A.G. (26 October 2000), para. 200)) then this competition worry was even greater and thus the result achieved all the more welcome.

32 “Increased scope for electricity imports competition in Northern Europe—a step towards an internal market for electricity” (Commission Press Release IP/01/30, Brussels, 11 January 2001).

33 “Second Report to the Council and the European Parliament on the Harmonisation Requirements: Directive 96/92 concerning the internal market for electricity”, (SEC 1999/470) 16 April 1999 (Section 1.3.1 on Respecting unbundling): the Commission recognises (s. 1.1.4) that “timely limited exceptions from the general rules under case by case regulatory control” may be necessary to encourage such construction.

34 COM(2000)297 final, n. 12, supra, section II on State of play of the opening up of elec tricity markets.

35 “Commission to demand German energy regulator” 338 (2000) Power in Europe (24 November 2000).

36 See, for example, her speech to the World Economic Forum in Davos, Switzerland on 29 January 2001 (summarised in “Loyola de Palacio sets out the conditions for successful gas and electricity liberalisation”, Commission Press Release IP/01/132, Brussels, 29 January 2001).

37 Directive 96/92/EC, above n 10, Art. 19(1), second para.

38 Directive 96/92/EC, above n 10, Art. 19(2). The 20GWh threshold has since been imple mented, while the 9 GWh level is currently required to be achieved by 2003. On the adoption of the Directive, the calculated market opening level required was 25.37%; the latest figures show a level of 30.2%, OJ 2001 C 27.

39 In this proposed system, only one entity can purchase and sell electricity within the area in question: the single buyer. As a result of this, all producers must sell their electricity to the single buyer, and at the other end of the scale all consumers will have to meet their require ments through purchases from the single buyer. Further, the single buyer would be given con trol over calls for tender, and would only grant certain consumers the possibility of concluding contracts for the supply of power from abroad. It is clear that this system does not leave much room for any significant opening up of the electricity market for new producers, any more than it is likely to provide consumers with increased choice and greater efficiency savings. It is equally clear that the aim of the single buyer proposal was to allow a planned economy approach to persist in those countries which were not yet ready to abandon it. See Midttun, A.Electricity Policy within the EU: One Step Forward, Two Steps Back”, Chapter IX in Midttun, A. (ed.), European Electricity Systems in Transition: A Comparative Analysis of Policy and Regulation in Western Europe, (Oxford, Elsevier, 1996) 272 Google Scholar.

40 “Working Paper on the Organisation of the Internal Electricity Market” of 22 March 1995 (which dealt with the question of the single buyer) (SEC (95) 464 final, (1995), printed in Europe Energy 24 March 1995, No. 443, Sec V.).

41 Indeed, the French proposed what they called a concept of “positive reciprocity” in return for agreement on the inclusion of the single buyer idea in the Directive. In the Directive, see Art. 19(5) and especially para, (b) thereof.

42 See Johnston above n 7.

43 Johnston, above n 7 at 134—135. Art. 19(5) (b) reads (so far as material):

“in cases where transactions . . . are refused because of the customer being eligible in only one of the two systems, the Commission may oblige, taking into account the situation in the market and the common interest, the refusing party to execute the requested electricity supply at the request of the Member State where the eligible customer is located”.

44 See, for example, Arts. 28—32 of the Dutch Electricity Act 1998.

45 Directive 98/30/EC of the European Parliament and of the Council of 22 June 1998 con cerning common rules for the internal market in natural gas OJ 1998 L 204/1, 21 July 1998.

46 See among many such statements, “Editorial Comment: Power Struggle”, October 2000 Power in Europe 19, which reported that the German economics minister was considering resorting to reciprocity to limit French power to competing for around only 30% of the German market, in an attempt to “shock France into abandoning its absurd protectionism”.

47 “How to duck the reciprocity clause” 124 (1999) EU Energy Policy (20 April 1999).

48 “How to duck the reciprocity clause” ibid. It has proved difficult to come to any agreed interpretation of the meaning of the reciprocity clause in Directive 96/92/EC, as different play ers in the game are more or less exposed to such problems due to the policies of the Member States on their (immediate) borders.

45 This suggestion was made, arguendo, during a presentation to the Annual European Energy Law Seminar in Noordwijk, The Netherlands on 11 and 12 May 1998.

50 “Energy for the Future: Renewable Sources of Energy—White Paper for a Community Strategy and Action Plan” COM(97)599 final (26 November 1997).

51 E.g. where a producer of renewable electricity trades from a country offering state aid into one offering “green certificates”, there is the danger of double support, by acquiring a certificate in the importing country; meanwhile, trade in the other direction may leave the producer from the other Member State with no support at all. More generally, different levels of support may encourage those customers who are free to seek power abroad to avoid paying the renewables sub sidy, thus pushing up prices at home and undermining the policy of supporting renewable electric ity production in the first place. These examples are drawn from COM(1998)167 (see n 53 below).

52 The essential point being that renewable power needs to be supported in some way, as it tends to appear more expensive than conventionally generated electricity, due to the failure of prices for the latter to factor in their environmental consequences (emissions, etc.).

53 “Commission Report to the Council and the European Parliament on Harmonisation Requirements. Directive 96/92 concerning rules for the internal market in Electricity” COM(1998)167 (16 March 1998).

54 See, e.g., the German Stromeinspeisungsgesetz of 1998 and the litigation concerning its impact in Case C-379/98 PreussenElektra v. Schleswag A.G. discussed below, Opinion of Advocate General Jacobs, 26 October 2000.

55 “Proposal for a Directive of the European Parliament and of the Council on the promo tion of electricity from renewable energy sources in the internal electricity market” COM(2000)279 final, 10 May 2000, OJ 2000 C 311/320.

56 Minutes of 16 November 2000, following in large part the Report adopted by the Committee on Industry, External Trade, Research and Energy of 30 October 2000 (FINAL A5-0320/2000).

57 The European Parliament would retain the figure of 23.5% laid down in the White Paper, believing that this still remains a realistic target, in spite of the Commission’s belief that a lower level of energy savings is to be expected by 2010.

58 “Indicative figures for Member State targets” are provided in the Annex to the proposal, which when taken collectively aim to reach the White Paper’s objective.

59 Art. 3(2) of the proposed Directive.

60 Furthermore, Art. 3(u) EC expressly provides that “. . .the activities of the Community shall include . . . measures in the sphere of energy” and this is given some specific expression in Art. 175 EC (ex-Art. 130s), which provides for the consultation of (inter alia) the European Parliament (as opposed to the use of the co-decision procedure of Art. 251 EC (ex-Art. 189b) when the Council seeks to adopt “... measures significantly affecting a Member State’s choice between different energy sources and the general structure of its energy supply”. Surely, this provides an ample legal basis for such mandatory measures, provided that their proposal is not viewed as disproportionate to the aim to be achieved (I am grateful to Joanne Scott for drawing the resolution of this point to my attention).

61 The so-called “green certificates” are often seen as a first step to introducing such trade and competition, by requiring consumers to purchase a certain amount of green certificates in their overall electricity use. Producers would then compete to sell such certificates to the consumers.

62 Case C-379/98 PreussenElektra v. Schleswag AG, delivered on 26 October 2000: see below the text following n 92.

63 COM(2000)297, above n 12 at 6.

64 E.g. in Art. 4, the Parliament would also require the Commission to report upon “the competitiveness of renewable energy sources on the energy market and progress in internalis ing external costs, as well as the status of subsidies to other energy forms”. Any proposal for legislation following on from this report would have to “satisfy the need for internalising external costs” (proposed new Article 4(a)a), while in an addition to Article 8(5), “No legisla tive initiative restricting support for renewable energies shall be taken until full internalisation of external costs has been achieved”. Finally, the Parliament calls on the Commission, in the redrafting of the Community framework for State aid for the environment, “to take into account the need for internalising external costs and removing the competitive disadvantages for renewable energies, and to permit on a long-term basis the national support schemes pur suant to this directive” (see the Explanatory Statement accompanying the Report adopted by the Committee on Industry, External Trade, Research and Energy, above n 56).

65 In its justification for the amendment suggested to Recital 16 of the proposed Directive.

66 Renewable electricity producers often suffer disproportionately under connection and transmission pricing due to their generally smaller scale and often remote location vis-à-vis the grid.

67 EU Energy Policy, Issue 141, 29 September 2000.

68 See COM(2000)297, above n 12 at 6: “electricity prices do not fully reflect the full social and environmental costs and benefits of the energy sources used”.

69 Art. 5 of the proposed Directive.

70 “Green light from the Council for the promotion of renewable sources of energy in the electricity market”, Commission Press Release IP/00/1413 of 6 December 2000.

71 EC Inform-Energy, No. 90 February 2001, 10. Mr Rekke was outlining the priorities of the Swedish Presidency in the energy sector.

72 EC Inform-Energy ibid at 15.

73 “Proposal for a Council Directive on Restructuring the Community Framework for the Taxation of Energy Products” COM(97)30 final, 12 March 1997.

74 “Second Report to the Council and the European Parliament on the Harmonisation Requirements: Directive 96/92 concerning the internal market for electricity”, (SEC 1999/470) 16 April 1999.

75 “The Commission insists that progress has to be made in adopting its 1997 proposal . . .[!]” (“Proposal for a Directive of the European Parliament and of the Council on the pro motion of electricity from renewable energy sources in the internal electricity market” OJ 2000 C 311/320, section 2.2.1, at 7).

76 EC Inform-Energy, No. 90 February 2001, 15.

77 European Voice 8 14 February 2001, 23.

78 EC In form-Energy, No. 90 February 2001, 15: an interesting suggestion in the light of obvious enthusiasm among certain Member States for the idea of closer co-operation, which has been made clear during Intergovernmental Conference negotiations at both Amsterdam (1997) and Nice (2000).

79 The press release concerning the Council’s agreement is accessible on the Commission’s website:

80 See Commission Press Release IP/00/1296 and MEMO/00/79 for the original proposal.

81 Case C-213/96 Outokumpu Oy v. Finnish Customs [1998] ECR 1-1777.

82 See case C-152/89 Commission v. Luxembourg [1991] ECR 1-3141, paras. 20-22, where the relevant comparator is deemed to be the lowest domestic tax rate, so that the fact that some domestic production is taxed at a higher rate is said to be immaterial.

83 Para 40 of the judgment, citing case 21/79 Commission v. Italy [1980] ECR 1, para. 16. Interestingly, Advocate General Jacobs had advised that this did not preclude such a system, in the situation where the method of production of the imported electricity was impossible to determine.

84 “Details of forthcoming proposals for full opening of the Internal Energy Market” No. 90 EC ¡nform-Energy February 2001, 8.

85 A subject on which the United Kingdom and The Netherlands made a concerted effort to produce some starting points: see the study that they jointly commissioned from OXERA (Oxford Economic Research Associates) on monitoring competition in the European Electricity and Gas markets (reported in “Electricity competition ‘league table’ “ 138 (2000) EU Energy Policy (15 June 2000). This was presented to the Council of Ministers for Energy on 30 May 2000, with the intention of encouraging debate and assessment: perhaps the Draft Communication shows that the Commission has taken this idea firmly on board.

86 As quoted in “Details of forthcoming proposals for full opening of the Internal Energy Market” No. 90 EC Inform-Energy February 2001, 8.

87 This issue will be discussed further below: see the text accompanying n 159 below.

88 Interestingly, this proposal seems to follow the pattern eventually established under the Second Banking Directive 89/646/EEC OJ 1989 L 386/1, where Art. 9(3) provides that the Commission can seek to secure equivalent market access under a Council negotiating man date, while Art. 9(4) allows the Commission to seek de facto national treatment of its own volition. See Johnston, above n 7 at 130-131 for discussion of the policy aims of such recip rocity provisions.

89 Reading de Palacio’s recent speech to the World Economic Forum (above n 36) together with the leaked Draft Communication.

90 See “Commission to demand German energy regulator” 338 (2000) Power in Europe (24 November 2000).

91 The Lisbon European Council (23—24 March 2000) requested the Commission, the Council and the Member States (“each in accordance with their respective powers”) to investi gate ways of speeding up the liberalisation of the electricity and gas sectors, with the aim of achieving a fully operational market (Presidency Conclusions, Lisbon European Council, 24 March 2000). This progress is to be examined at the Stockholm European Council in March 2001 (according to COM(2000)297, n 12 supra).

92 From specified sources: water, wind, sun and biomass (Para. 1 StrEG 1998).

93 Para. 2(1), StrEG 1998 (BGBl. 1998 I, 730).

94 Para. 3(2), StrEG 1990 (BGBl. 1990 I, 633).

95 BGB1. 1994 I, 1618.

96 Letter to the German Government, 25 October 1996, following complaints by the elec tricity supply undertakings about the impact of the renewables purchasing obligation upon them.

97 Gesetz zur Neuregelung des Energiewirtschaftsrechts (Law reforming the Law on the Energy Supply Industry) (BGBl. 1998 1, 730).

98 Environmental campaigners have welcomed this ruling, although for them the logic behind such support measures is that “electricity prices do not reflect the environmental costs incurred by other forms of power generation” (EU Energy Policy, Issue 142,31 October 2000).

99 That electricity is treated as a good for the purposes of the EC Treaty is clear: see Case 2/64 Costa v. ENEL [1964] ECR 1, Case C-393/92 City of Almelo v. Energiebedrijf Ijsselmij [1994] ECR 1-1477 and Cases 157, 158, 159 and 160/94 the “Energy Cases” (enforcement actions by the Commission against the Netherlands, Italy, France and Spain respectively).

100 Para. 2(2), StrEG 1998.

101 Para. 195 of the Opinion of Advocate General Jacobs in Case C-379/98 PreussenElektra v. Schleswag AG, delivered on 26 October 2000 (hereafter, “the Opinion”). N.B. The opinion uses the old EC Treaty numbers, while this paper uses those in force after the Amsterdam Treaty for convenience.

102 Para. 194 of the Opinion.

103 Paras. 200–202 of the Opinion.

104 Delivered on 26 November 1996, [1997] ECR 1-5701, paras. 69-85, esp. para. 81 et seq.

105 Para. 220 of the Opinion.

106 Furthermore, this rejection of Art. 8(3) as a possible basis accords with the Commission’s interpretation (in its 1999 Working Paper “Electricity from renewable energy sources and the internal electricity market”), which stresses that Art. 8(3) concerns dispatching priority only without any reference to further financial support.

107 Given the current proposals for a Directive on the promotion of electricity from renewable energy sources in the internal electricity market (COM(2000)279 final, above n 55), Advocate General Jacobs correctly declined to view the measures in Directive 96/92/EC as exhaustive harmonisation. This is welcome clarity, compared to some of the confusion on the status of harmonisation directives engendered by cases such as Case C-1/96 Compassion in World Farming [1998] E.C.R. I-1251, viz: “exhaustively common minimum standards”, which Notaro has described as a contradictio in termimis (see 25 ELRev (2000) 467, 474).

108 Confirmed in Case 302/86 Commission v. Denmark [1988] ECR 4607.

109 See, e.g., Cases C-1/90 and C-176/90 Aragonesa de Publicidad Exterior and Publivta [1991] ECR 1—4151, para. 13.

110 Para. 217 of the Opinion.

111 Case C-2/90 Commission v. Belgium [1992] ECR 1-4431.

112 Case C-203/96 Dusseldorp and others v. Minister van Volkshuisvesting, Ruimtelijke Ordening en Milieubeheer [1998] ECR I–4075.

113 Athough the Court ruled that the Dutch government’s reasoning (that the restriction was necessary to safeguard the viability of the designated sole end-processor) was in fact a purely economic justification. As both Van Calster, (25 (1999) ELRev 178, 183Google Scholar) and Notaro, (25 (2000) ELRev 467, 479 Google Scholar) have noted, the Court could simply have rejected the claim by stating that the measure was directly discriminatory. Furthermore, the rejection on economic grounds alone is problematic: the economic considerations could be seen as purely ancillary to good waste management (Notaro).

114 Case C-389/96 Aher-Waggon v. Germany [1998] ECR 1–473.

115 OJ (1979), L18/26, as amended by Directive 83/206/EEC, OJ 1983 L 117/15.

116 Para. 227 of the Opinion. It might be suggested that there was in fact no discrimination here, because the owners of the pre-registered German aircraft might be said to have had a legitimate expectation that their current registrations would not be nullified without some transitional scheme, given the costs they had incurred in the registration and maintenance of such aircraft under the previous regime, in reliance on their (under German law) fundamental right of property to be able to use their aircraft as before. However, it is unlikely that this would prove a successful argument before the Court.

117 Case C-67/97 Bluhme [1998] ECR 1-8033.

118 Notaro 25 (2000) ELRev 483.

119 In Case C-120/95 Decker v. Caisse de Maladie des Employés Privés [1998] ECR 1-1831 a similar issue arose (undermining the balance of the social security system) and this has par allels in the other areas of the free movement case law (see Case C-204/90 Bachmann v. Belgium [1992] ECR 1-249, where, in a case concerning a provision that was arguably directly discriminatory, the public interest in the “cohesion of the Belgian tax system” was held to be a sufficient justification for the measure in question). These cases show that the strait jacket imposed by the narrow list of grounds in Art. 30 EC can cause difficulties in a number of areas that were not considered to be a potential restriction on trade or movement when the E(E)C Treaty was first drafted: the problem is not unique to the environmental sector, but is well illustrated thereby.

120 Para. 226 of the Opinion.

121 “Environmental protection requirements must be integrated into the definition and implementation of Community policies . . . including . . . the internal market”.

122 Para. 233 of the Opinion.

123 Para. 236 of the Opinion.

124 Para. 237 of the Opinion.

125 COM(2000)279 final, above n 55 at 6.

126 For a general discussion of some of the relevant competition law issues in the sector, see Hancher, L.Competition policy catches up with the energy sector139 (2000) EU Energy Policy, 13 July 2000 Google Scholar. One area in need of further coverage, as highlighted by the debate on renewables above (see the text at n 55 above) is the role of state aids law and policy in the elec tricity sector.

127 See Slot, P.J.Energy and Competition31 (1994) CMLRev 511 Google Scholar for a useful account of the Commission’s hesitant approach to applying the competition rules to the energy sector.

128 COM(88)232, (1988), para. 35.

129 See above n 99.

130 Furthermore, the rapid pace of liberalisation in some countries, coupled with certain imbalances in market opening between different Member States, has led to a rash of merger activity over the past few years. Unfortunately, constraints of space here preclude any detailed consideration of the fast-moving case law in the merger field.

131 For a detailed commentary on these provisions, see Whish, R.Regulation 2790/99, The Commission’s new style block exemption for vertical agreements37 (2000) CMLRev 887.Google Scholar

132 Commission Regulation 2790/1999/EC of 22 December 1999 on the application of Art. 81(3) of the Treaty to categories of vertical agreements and concerted practices OJ 1999 L 336/21, Art. 13.

133 I.e. “competition concerns can only arise if there is insufficient inter-brand competition, i.e. if there exists a certain degree of market power” (Communication from the Commission on the application of the Community competition rules to vertical restraints—Follow-up to the Green Paper on Vertical Restraints’, Section III(1) “Vertical restraints and market power”).

134 “Commission Notice—Guidelines on Vertical Restraints” OJ 2000 C 291/1.

135 As amended by Article 1 of Council Regulation 1216/1999/EC OJ 1999 L 148/5, 15 June 1999.

136 See the Guidelines, above n 134, paras. 62-65.

137 But not between producers/distributors and final consumers, as their position is not covered by the exemption under Art. 2(1).

138 See the Guidelines above n 134, paras. 66-67.

139 Complicated still further by the possibility (under Article 11) that the parties’ “connected undertakings” may provide a presence on a level that prevents reliance upon the exemption.

140 Above n 134, para. 27.

141 Hoffmann-La Roche A.C. v. Commission [1978] ECR 1139.

142 Joined cases C–395 and 396/96 P Compagnie Maritime Belge v. Commission, judgment of 16 March 2000, concerning the practices of certain liner conferences in the shipping indus try. The relevant sectoral block exemption (Regulation 4056/86/EEC on Maritime Transport, OJ 1986 L 378/4) expressly states that such exemptions do not provide any defence under Article 82 EC.

143 Compagnie Maritime Beige above n 142 para. 36.

144 Compagnie Maritime Beige ibid paras. 44—45.

145 Case T-51/89 Tetra Pak Rausing S.A. v. Commission [1990] ECR II-309, para. 21 et seq. This assessment is echoed by Furse, M. Competition Law of the UK & EC 2nd edn. (London, Blackstone Press, 2000), 208 Google Scholar.

146 This is a bit of a “better the devil you know” attitude, yet it does contain some justifi able concerns (see the discussion of the modernisation proposals in the text accompanying n 147 below).

147 See “Proposal for a Council Regulation on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty [etc.]” COM(2000)582 final (27 September 2000) (see Commission Press Release IP/00/1064 and OJ 2000 C 365/284 (19 December 2000)). This document is also available on the website of the Commission’s Directorate General for Competition—see this address: It is intended to replace the current Regulation 17/62.

148 Furthermore, notification usually granted immunity from fines and prevented legal challenges to an agreement’s validity before national courts.

149 “Commission White Paper on Modernisation of the Rules implementing Arts. 85 and 86 of the EC Treaty” (Commission Programme No. 99/027, 28 April 1999) OJ 1999 C 132/1, paras. 12 and 13.

150 Hancher, L.Competition policy catches up with the energy sector139 (2000) EU Energy Policy 13 July 2000Google Scholar.

151 The adoption of prohibition decisions, decisions accepting commitments and decisions withdrawing the benefit of a block exemption (Art. 11(4) of the proposed Regulation).

152 Proposal for a Regulation, above n 147 section 2.C.2.

153 Commission Notice on the “Application of the Competition Rules to Access Agreements in the Telecommunications Sector—Framework, Relevant Markets and Principles” OJ 1998 C 265/2.

154 Commission Consultative Communication on the status of voice on the internet OJ 2000 C 177/4.

155 Commission Communication “Unbundled Access to the Local loop—Enabling the competitive provision of a full range of electronic communication services including broad band multimedia and high-speed internet”, COM(2000)237, 26 April 2000, OJ 2000 C 72/55, 23 September 2000.

156 Draft Competition Directive consolidating existing Directives on competition in the telecommunications markets, 12 July 2000 (see Commission Press Release IP/00/766 of the same date).

157 See, for a selection of material in English, Albers, M.Views and Expectations of Competition—Developments in the EU Electricity Market”, UNIPEDE/EURELECTRIC Workshop on the End of the Implementation Process of the Internal Electricity Market Directive, Brussels 24 and 25 March 1999 Google Scholar (see:; Tradacete, A.The Role of Competition Policy in the Liberalisation of EU Energy Markets”, Brussels, April 2000 Google Scholar (see:; Schaub, A.Competition Policy and liberalisation of energy markets”, European Utilities Circle 2000, Brussels, 23 November 2000 Google Scholar (see the following address on the DG(Comp) website for details:

158 An opinion reflected in the leaked Draft Communication, discussed above n 84.

159 This is a necessarily brief overview of some of the relevant issues concerning services in the general interest, focusing mainly on the likelihood of political or legislative action. There is also a wealth of case law on Arts. 86(1) and (2) EC (ex-Art. 90 EC), discussed in contributions by, inter alia Slot, P.J. 28 (1991) CMLRev 964 Google Scholar and 35 (1998) CMLRev, Edward, D. and Hoskins, M.Article 90, Deregulation and EC Law32 (1995) CMLRev 157 Google Scholar, Edward, D., “Article 90 EC Treaty and the Dergulation, Liberalisation and Privatisation of Public Enterprises and Public Monopolies”, Report for the Series “Europe before the Intergovernmental Conference 1996”, (Bonn, Zentrum für Europäisches ‘Wirtschaftsrecht, 18 December 1995)Google Scholar, Publication No. 60 and Hancher, L 16 (1998) Journal of Energy and Natural Resources Law 42 CrossRefGoogle Scholar, and summarised in a very helpful manner in Ross, M. 25 (2000) ELRev 22 Google Scholar.

160 OJ 1996 C 281/3.

161 Commission Communication of 1996, above n 160 para. 1.

162 Presidency Conclusions, Lisbon European Council, 24 March 200O, para. 19.

163 European Commission Communication “Services of General Interest in Europe” OJ 2001 C 17/4.

164 Council on Internal Market, Consumers and Tourism, Brussels 30 November 2000 (Press release 13663/00).

165 As the Commission notes in Annex I to the Communication, not only are many licences made subject to certain conditions on service standards, but such levels of performance are another area in which companies compete: hence, intense competition can lead to significant improvements in standards of service, above the levels set by regulators. As yet, no Member State has sought a derogation (under Art. 3(2)) from the requirements of Directive 96/92/EC on the ground that no less restrictive way of achieving a public service objective could be found, which suggests that this improvement in standards is sustainable at least in the short to medium term.

166 Art. 3(2) of Directive 96/92/EC above n 10.

167 “Details of forthcoming proposals for full opening of the Internal Energy Market” No. 90 EC Inform-Energy February 2001, at 9; and see the new Communication (above n 163), paras. 62-63.

168 See the Commission’s latest Communication (above n 163), para. 59 for examples from the postal and telecommunications sectors.

169 Ross, M.Article 16 EC and services of general interest: from derogation to obligation?25 (2000) ELRev 22, 33-34Google Scholar.

170 Communication of 21 January 2001, n. 163 supra, para. 57.

171 Commission Communication of 21 January 2001, ibid, para. 64, citing the reference in Art. 36 of the Draft Charter of Fundamental Rights to access to services of general economic interest, viz: “The Union recognises and respects access to services of general economic inter est as provided for in national laws and practices, in accordance with the Treaty establishing the European Community, in order to promote the territorial and social cohesion of the Union”.

172 Ross, above n 169, at 34-38.

173 See the admirably clear discussion by Patterson W. “Can Public Service survive the market? Issues for Liberalised Electricity” Royal Institute of International Affairs Briefing Paper, New Series, No. 4, July 1999.

174 Annex I to the Communication of 21 January above n 163.

175 “Commission Work Programme for 2001” No. 90 EC Inform-Energy, February 2001, 7, which combines COM/01/28 (31 January 2001) with the leaked internal paper discussed above n 184.

176 OJ 2001 C 17/4, para. 59 (in the footnotes).

177 See Jones, T.Dark days for electricity sector dim hopes of French volte-face”, European Voice 1-7 February 2001, 21 Google Scholar, which records the unions’ intense pressure on the socialist government to resist the drive towards liberalisation, using the Californian crisis as an indicator of what can go wrong in an insufficiently regulated market (even though it seems clear that the conditions for the Californian situation are not present in the European, or the French, market). The article “Electricité de France—A giant awakes” (The Economist, 4 November 2000, 119) suggests that the EdF management are currently talking a good liberal isation game, while handicapped in this by the domestic political situation, but points out that EdF still benefits greatly from its incumbent status. This suggests a tension even within the French sector itself about the future role for their industry within any European electricity market.

178 See “European Commission—Lisbon protects EDP with golden share” 141 (2000) EU Energy Policy, 29 September 2000. The Court of Justice in Case C-58/99 Commission v. Italy, judgment of 23 May 2000 has ruled that a similar golden share held by the Italian state in Eni infringed the Community rules on the free movement of capital and was thus illegal.

179 “Second Report to the Council and the European Parliament on the Harmonisation Requirements: Directive 96/92 concerning the internal market for electricity”, (SEC 1999/470) 16 April 1999, section III on Regulation of the Electricity network at the European level.

180 See, for example, the position paper presented by the European Energy Millennium Forum (EEMF) at a conference in Brussels on 27 June 2000, attended by the Commission (reported in “Is the EU ready for a European energy regulator?” 139 (2000) EU Energy Policy, 13 July 2000).

181 See, generally, Patterson, W. Transforming Electricity: The Coming Generation of Change (London, RIIA/Earthscan, 1999 Google Scholar).

182 Commission Green Paper “Towards a European strategy for the security of energy sup ply” COM(2000)769, Brussels, 29 November 2000 (available on the DG(TREN) website at the following address:

183 Case 120/78 Rewe-Zenrale A.G. v. Bundesmonopolverwaltung für Branntwein [1979] ECR 649 (“Cassis de Dijon”).